James McCall, a well-known fund manager hired by Merrill Lynch & Co. in 1999, has resigned from the company, The Wall Street Journal reported today. The two aggressive funds managed by McCall, the Merrill Lynch Focus Twenty Fund and Merrill Lynch Premier Growth Fund, have lost 71% and 54%, respectively, so far this year.

Neither McCall nor Merrill is commenting on the reason for the portfolio manager’s departure, according to the Journal. McCall had been recruited by former Merrill Lynch Investment Managers president Jeffrey Peek. Peek resigned in September after the firm selected Stanley O’Neal, not him, to be president of the firm.

McCall was surrounded by controversy as soon as he decided to join Merrill. He was formerly with Pilgrim Baxter & Assoc., where he ran several PBHG Funds that performed very well under his management. When he decided to leave the firm for Merrill, McCall filed a lawsuit against Pilgrim Baxter, claiming that the non-compete agreement he had signed with the firm was not binding ( MFMN 5/24/99). Pilgrim Baxter then filed a counter suit asking that the court uphold the agreement.

In his suit, McCall made allegations that the firm never paid him money he was owed and that it engaged in nepotism, favoring CEO Harold Baxter’s daughter, another portfolio manager. The suit was settled out of court in August 1999 ( MFMN 8/9/99).

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